~ Alan Dupont
As the fossil fuel era fades, critical minerals are set to become the new oil. If not yet ubiquitous, they are the sinews of the emerging green and hi-tech economies.
They are also crucial for defence because they “power the weapons that determine geopolitical primacy”, says security analyst Liam Gibson. Defence needs rare earths for a vast array of applications, including smart bombs, radar, communication systems and advanced fighter aircraft.
This means that they are a strategic asset as well as an economic resource. Only a few minerals have played this role historically.
Silver needed for coinage in ancient times and oil, which still lubricates the wheels of transport and industry, are among them.
The problem for the world is that China has cornered the market in critical minerals, especially the 17 rare earths that are processed into high-value tech metals.
Many of these have esoteric Greek names and are not well known.
They soon will be.
Neodymium is representative.
It produces incredibly powerful magnets that drive motors and generators in everything from wind turbines to the magnetic resonance imaging systems that are used to scan our bodies. Virtually all current and planned hybrid and electric vehicles require neodymium or praseodymium magnets. In a strategic play with enormous consequences for the West, China saw early the importance of critical minerals and set out to capture the whole ecosystem for economic and geopolitical advantage. It has largely succeeded by picking winners, using cheap labour, subsidising local exporters and dis – regarding the environmental damage caused by unregulated processing. In a little more than a decade China’s price dominance buried competitors, transforming the country from a minnow to a critical mineral’s giant that now controls the value chain all the way from mining to processing and manufacturing.
If this sounds familiar, it is.
Under Xi Jinping, the party-state has adopted the same approach to gain market dominance in pharmaceuticals, manufacturing, renewables and battery technology.
Market concentration is never a good thing, particularly if the main supplier is a state which practices coercion as a tool of statecraft. Vladimir Putin’s invasion of Ukraine exposed the folly of Europe’s reliance on Russia for gas. China weaponised rare earths against Japan in 2010 to force the resolution of a maritime dispute in its favour. Tokyo learned its lesson, reducing its dependence on Chinese rare earths from 90 to 60 per cent.
The good news is that Australia is well positioned to provide the critical minerals diversification that the world needs. That’s because we have a rich endowment of critical minerals; world class mining expertise; a rapidly developing renewable energy sector to power the processing plants that turn mined ore into usable powder; and high environmental, social and governance standards that are industry best practice.
These were among the key findings of the recently concluded inaugural Darwin Dialogue on critical minerals that attracted an unusually eclectic gathering of politicians, officials, diplomats, miners and experts from Australia, Japan, India, Europe and the US to the Northern Territory.
Convened by the Australian Strategic Policy Institute, there was broad consensus among its participants that China’s command of the critical mineral’s universe would not be diluted without friend-shoring, co-operation and strong government support.
“Pure market-oriented businesses” cannot compete with authoritarian states, says Gibson.
Their companies don’t need to make a profit if the government wants control of an industry for geopolitical purposes.
Since critical minerals is not a level playing field, we should play to our strengths by building a trusted, secure and sustainable value chain in which our high ESG standards are a clear comparative advantage. But we are starting from a long way back. Our critical minerals industry is still in its infancy despite recent encouraging progress. Surprisingly, much of the continent remains geologically unexplored and commercially unexploited.
We have only a handful of mines producing critical minerals, and only one company that can refine rare earths.
China spends vast sums on protecting its near monopoly, which includes research and development and an 80 per cent share of rare earths intellectual property, once owned by the West. Australia has less than 1 per cent. Meanwhile, the US, Japan and Europe are ramping up investment in critical minerals and associated technology.
The Biden Administration committed more than half a trillion dollars to clean energy in November.
Small Australian mining juniors struggle to obtain start-up capital and government financial support to fund the billion plus dollars required to establish rare earths processing facilities. The big miners, with deep pockets, have been notably absent from the tech metals sector.
Our university system is failing to deliver the qualified metallurgists, mining engineers, industrial chemists and earth science graduates needed to establish a sector which should do more than dig up critical minerals for processing and value adding offshore. The number of earth science graduates has actually declined. Japan has shown the way forward by treating critical minerals as a strategic resource; encouraging exploration; and exhaustively surveying and identifying commercially exploitable ore bodies. Our national approach is too fragmented, lacks scale and needs to be elevated in the Albanese government’s policy priorities.
As the only significant democratic supplier of rare earths in a supply-constrained world, there is now a once-in-a generation opportunity to establish Australia as a critical minerals superpower.
This would be a boon to the world and a virtuous convergence of our climate change, energy and national security interests.